THE Obama administration has labelled Israel's settlement-building programme "provocative" and a threat to peace in one of its harshest condemnations yet.

Israel rebuffed the criticism by announcing plans for 3,600 homes in east Jerusalem and the West Bank on land claimed as part of a future Palestinian state.

Plans for a new 2,600-home development in Givat Hamatos – the first new settlement in east Jerusalem for 15 years – were approved. Permission was also given for 1,048 houses in several existing settlements.

It was the latest in a spate of decisions to expand settlements on the Palestinian side of the pre-1967 "green line" border since last month's UN vote granting de facto recognition to Palestinian statehood.

Accusations

This prompted the US State Department to accuse Benjamin Netanyahu's government of sabotaging the chances for peace.

"We are deeply disappointed that Israel insists on continuing this pattern of provocative action," said Victoria Nuland, a spokeswoman. "These plans of new construction run counter to the cause of peace. Israel's leaders continually say they support a path towards a two-state solution, yet these actions only put that goal further at risk."

While the US has criticised settlement projects before, even Israeli officials admitted the latest denunciation represented a sharp departure in tone from the country's closest ally.